Fiscal Cliff

pqrdef

HAMISH_MCTAVISH wrote: »

And most of the rest is owned by Pension funds, banks, building societies, etc. So any interest paid ends up back in the accounts of savers, pensioners, etc.

And if you stuff the money in the mattress, what you're really stuffing in there is only IOUs from the Bank, which has borrowed the money.

And if you stash gold under the floorboards, you've only given your money to people you hope to get it back from later (with extra).

HAMISH_MCTAVISH wrote: »

In the case of the small minority of debt held by overseas investors, you may have a point.

We need them as well, because if we don't export enough goods to pay for our imports, we have to esport IOUs.

Basically there isn't much do with money except get somebody to borrow it, one way or another.

sabretoothtigger

I did predict the current mess in 2005 and even got the timing about right.

I thought the mortgage fraud at that time was a disaster but not this much. Its amazing how this whole malfeasance keeps running like a marathon

But the reality is that most debt is held domestically, and cannot therefore make society poorer as a result.

Thats the Krugman line that all things are justified. Society can harm itself but in any case large amounts of sterling or dollars are held abroad and apparently not used directly.

If this cash is mobilised we will become much poorer though I guess they could purchase all our assets instead like people keep saying Greece should just sell some islands and get it over with

stash gold under the floorboards

It'll be the same as when you put it under there. That is the worth that it does not change.
If society is poorer it will buy more then before presumably, also it may be far better then keeping cash which can decay


Fiscal cliff in general is misdirection, the real changes ahead are not signposted hence the peril far greater and potential for a sharp turn off road much more likely.

I think avalanche is more of a suitable dynamic, every ski lodge needs snow for business then one day it all becomes uncontrollable and disaster occurs but its usually unforeseen and unpredictable not like this headline hoax

ILW

pqrdef wrote: »

People with high incomes get big mortgages and high limits on their credit cards. If the wouldn't or couldn't, their income would be a lot less useful. The rich are the biggest debtors.

Businesses also grow by raising as much capital as they can pay interest /dividends on. How else? the whole economy runs on borrowed money.

Borrowing is what income is for. A business that's cutting back its operations to reduce its debts is a business in decline. A prospering business focuses on generating more income, even if it has to borrow more to do it. Why else does the government keep banging on about bank lending to SMEs?

Not strictly true.
A business can reduce it's operations by moving into higher margin activities. It can be more profitable whilst showing lower turnover.

vivatifosi

I'm really surprised that the dollar hasn't fallen more on the money markets. If anyone works in the markets, can they please tell me if it is presupposed that this will be solved before tomorrow, therefore there won't be an impact?

Miss_Havisham

vivatifosi wrote: »

I'm really surprised that the dollar hasn't fallen more on the money markets. If anyone works in the markets, can they please tell me if it is presupposed that this will be solved before tomorrow, therefore there won't be an impact?

no comment on your post, but I want to thank you for mentioning moles - I've lost 2 friends in their 40's through skin cancer.

Miss H

sabretoothtigger

http://www.economist.com/content/global_debt_clock?fsrc=scn/tw/te/eoy/adventrerun

I thought we were 1tn only :eek:

I'm really surprised that the dollar hasn't fallen more on the money markets.

Be more surprised if politics reflects reality.
The dollar didnt fall last time either but it is gradually dropping over time I think by a fair bit. It was 120 in 2000 and is now 80. UK was 100 in 2005 and 84 now

Dont take it too literally, its not really a cliff. If anything the shock will be a series of these events have to occur in the next decade. They can do a deal anytime in Jan so far as I know, deadline is more amateur dramatics, etc

Generali

vivatifosi wrote: »

I'm really surprised that the dollar hasn't fallen more on the money markets. If anyone works in the markets, can they please tell me if it is presupposed that this will be solved before tomorrow, therefore there won't be an impact?

Do you mean FX markets as money markets are where money is lent and borrowed, usually short term? FX markets are where relative values of currencies are discovered, money markets are where borrowing rates are discovered.

The reasons the dollar hasn't tanked against the Euro and Pound are two fold IMO:

- The dollar is a 'safe haven'. When everything goes to hell in a handcart, people like to be holding dollars. An example is that when the US went hit the borrowing limit and when the US national debt got downgraded, on both occasions the dollar and the price of US Government debt rose.
- The dollar, the quid, the Yen and the Euro are all chasing each other down. If you look at the value of the US Dollar vs currencies like the Swiss Franc, Aussie Dollar or Loonie (Canadian Dollar) then you can see that it hasn't held its value so well.

Generali

sabretoothtigger wrote: »

Dont take it too literally, its not really a cliff. If anything the shock will be a series of these events have to occur in the next decade. They can do a deal anytime in Jan so far as I know, deadline is more amateur dramatics, etc

This really is a storm in a teacup. There will be a big impact on the couple of million people claiming EUC (the unemployment benefit extension) but apart from that the impact is likely to be small in economic terms.

wotsthat

I've found the whole fiscal cliff difficult to get excited about. I'm sure the media are delighted though - Washington must be a much better gig than Delhi or Baghdad at the moment.

By comparison with the clowns in US politics we're blessed.

There will be a compromise no doubt during the final seconds before the world plummets into the abyss. Both sides will claim victory and the world will keep turning until the next 'crisis'.

Thrugelmir

wotsthat wrote: »

I've found the whole fiscal cliff difficult to get excited about.

The fiscal cliff is showing very clearly the social divide in the USA. A very different attitude to the UK.